Chess is a contained universe: there are only 32 pieces on the
board and 64 squares those pieces can occupy. But starting up a
company takes much more than raw intellectual ability; it
requires what Thiel calls "The Mechanics of Mafia," or the
understanding of complex human dynamics. Linking the two worlds
is Thiel's passion. Here are some of the chess concepts he
highlighted in his class, thanks to
notes from one of his former students, Blake Masters:

Know the relative value of your pieces:

In chess, the queen is the most valuable piece on the board. In
the standard valuation system, it is given a 9, whereas the rook
(5), bishop (3), knight (3), and pawn (1) are lower. In his
lecture Value Systems, Thiel mentions Guy Kawasaki’s
equation on how to assess the value of a company based on the
types of people you have:

From his lecture If You Build It, Will They
Come? Thiel points out that within any group, there is
a wide range of talent. This goes for engineering as much as it
goes for sales. “Engineering is transparent … It is fairly easy
to evaluate how good someone is. Are they a good coder? An
ubercoder? Things are different with sales. Sales isn’t
very transparent at all. We are tempted to lump all salespeople
in with vacuum cleaner salesmen, but really there is a whole set
of gradations. There are amateurs, mediocrities, experts,
masters, and even grandmasters.”

“But if you don’t believe that sales grandmasters exist, you
haven’t met Elon [Musk]. He managed to get $500m in government
grants for building rockets, which is SpaceX, and also for building electric cars,
which is done by his other company, Tesla.”

The take-away lesson: Just like with chess pieces, people are not
of equal value when it comes to your organization. You must be
able to accurately assess their value. And within any field there
are amateurs, mediocrities, experts, masters, and grandmasters.

Know how your pieces work best together:

In his lecture The Mechanics of Mafia Thiel discusses
two personality types: “nerds” and “athletes.” “Engineers
and STEM people tend to be highly intelligent, good at problem
solving, and naturally non zero-sum. Athletes tend to be
highly-motivated fighters; you only win if the other guy loses.”
A company made up of only athletes will be biased toward
competing. A company made up of only nerds will ignore the
situations where you have to fight. “So you have to strike the
right balance between nerds and athletes.”

The take-away lesson: You need some athletes to protect your
nerds when it’s time to fight.

Know the phases of the game and have a plan:

In chess, there are three phases: the opening, the middle game
and the end game.

From his lecture Value Systems Thiel notes: “People
often talk about ‘first mover advantage.’ But focusing on that
may be problematic; you might move first then fade away. The
danger there is that you simply aren’t around to succeed, even if
you do end up creating value. More important than being the first
mover is the last mover. You have to be durable. In this one
particular at least, business is like chess. Grandmaster
Jose Raul Capablanca put it very well: to succeed ‘you must study
the endgame before anything else.’”

From his lecture War and Peace: “A good intermediate
lesson in chess is that even a bad plan is better than no plan at
all. Having no plan is chaotic. And yet people default to no
plan.”

Take away lesson: Moving first isn’t always an advantage. Think
about poker. If you’re the last to bet, you have the most
information. The endgame is where the most decisive moves are
made. Study it and make sure you’re around at the right time to
make your move. Have a plan.

Talent matters; there is more to success than
luck:

In chess, talent clearly matters. In business and life, both
talent and luck matter.

From his lecture You Are Not A Lottery Ticket, Thiel
said that “when we know that someone successful is skilled, we
tend to discount that or not talk about it. There’s always a
large role for luck. No one is allowed to show how he actually
controlled everything.”

In his lecture If You Build It, Will They Come?
Thiel explained that "since the best people tend to make the best
companies, the founders or one or two key senior people at any
multimillion-dollar company should probably spend between 25
percent and 33 percent of their time identifying and attracting
talent.”

Take away lesson: Some people hold more value and control more
resources than you realize. Invest your time in finding
those talented people for your organization.

Chess is a brutal mental game. So is life. Make your
moves carefully.

According to chess grandmaster Danny King's interview with 60
Minutes, “Chess is a really brutal game. I think
because it’s so contained. It’s all going on in the head. And if
you lose to your opponent, you feel stupid. You can call someone
all the names under the sun, but if you call someone stupid,
that’s the worst thing you can say to another human being. And
that’s a bit what it feels like when you lose a game of chess.
It’s all intellectual.”

Take away lesson: In the words of King: “You can’t take your
moves back. Once you play your move you could be stepping into
some horrible trap.”